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NST/Engineers, Inc. Company Practice: Conduct of The Three Phases of Environmental Site Assessments (ESAs)


   Our advice to all individuals or corporations, worldwide, is that negotiations for real estate transactions should not proceed without, at a minimum, a properly executed Phase I Environmental Site Assessment. Our Phase I ESAs are modeled after, and incorporate, ASTM Standard E-1527-00 and E-1528-00. As such, this practice assists a property purchaser to satisfy one of the requirements to qualify for the innocent landowner defense to RCRA liability. The Company believes this practice and it’s authorized procedures, constitute "all appropriate inquiry into the previous ownership and uses of the property consistent with good commercial or customary practice" as defined in 42 USC [section]9601(35)(B).
   Personnel and Associates conducting Phase I ESAs shall be environmental professionals who have successfully completed Company approved training and demonstrated their ability to perform this task, and who are certified by NST/Engineers, Inc. as such.


    This practice is designed to provide a comprehensive coverage of Phase I objectives. Further, it is to provide a logical sequence for reporting of all findings in a standardized format. The goal of the format is to facilitate review, evaluation, and approval of a Phase I report. The details of this practice: investigation methods, minimum reporting requirements, explanations of terminology, and approved report format shall be incorporated in a set of standard procedures.

   A complete Environmental Site Assessment can involve three Phases, depending upon the size, type, construction and location of the property; the past and present intended use(s) of the property; and availability and access to complete records.


A Phase I ESA determines, for a parcel of real estate, the "recognized environmental conditions." That is, the presence or likely presence of any hazardous substances or petroleum products on a property under conditions that indicate an existing release, a past release, or a material threat of a release of the substance(s) into structures on the property, or into the ground, groundwater, or surface water of the property. It does this by accomplishing due diligence in:
   1. A visual inspection of the property, including walking over the entire site, ideally with the owner/manager/user present to answer questions.
   2. A comprehensive photographic log.
   3. Interviews with the owner/manager/user of all adjacent properties.
   4. A thorough review of all "practically reviewable" records pertaining to the property and surrounding properties within ASTM radii.
   5. A comprehensive written report.


   Based on a properly executed Phase I report advising a Phase II report, a Phase II shall consist of:
   1. The physical sampling of the site, using the recommendations of the Phase I report as a minimum guideline. 
   2. A comprehensive written report detailing the rationale for the sampling that took place, the sampling protocols and procedures employed, an explanation of the analytical results, and, if necessary, a description of the recommended remedial action needed to restore the site to the appropriate condition for its intended use.


Based on a properly executed Phase II report, a Phase III shall consist of:
   1. The design and implementation of the remediation of the site.  
   2. All necessary reports and permits to achieve cleanup of the site to agreed upon site specific standards.


   The scope of this practice includes research and reporting requirements that support the user's ability to qualify for the innocent landowner defense. As such, sufficient documentation of all sources, records, and resources utilized in conducting the inquiry required by this practice must be provided in the written report.
This practice does not purport to address all of the safety concerns, if any, associated with its use. It is the responsibility of the user to establish appropriate safety and health practices.

   The degree to which an ESA is conducted will vary according to the environmental concerns identified for each real estate transaction and the laws of the country in which the site is located. However, all ESAs must be comprehensive enough so that environmental risks are properly considered in any business decision involving the real estate transaction.

CERCLA Requirements Other Than Appropriate Inquiry: This practice does not address whether requirements in addition to appropriate inquiry have been met in order to qualify for CERCLA's innocent landowner defense (for example, the duties specified in 42 USC [section]9607(b)(3)(a) and (b).

   Phase I report users are to be cautioned that federal, state, and local laws may impose their own environmental assessment obligations. Users must also be made aware that there may be other legal obligations with regard to hazardous substances or petroleum products discovered on property that are not addressed in this practice and that may pose risks of civil and/or criminal sanctions for non-compliance.


   In some cases, completion of Phase I may result in an ESA which is comprehensive enough to adequately assess environmental risks. For example, Phases II and III may not be necessary if available site information is adequate or if environmental risks are satisfactorily addressed by an indemnification.
    If more than one phase is conducted, the phases would logically occur in a sequential fashion, with information obtained from each phase used to better define the scope of work in the next phase. However, the schedule for completing the real estate transaction may require that several phases be conducted simultaneously.


   The Phase I report is confidential and remains the property of the client. An ESA is confidential and privileged if developed in anticipation of possible litigation. Accordingly, all parties involved in the performance and review of an ESA must take appropriate steps to protect the unauthorized disclosure of confidential and/or privileged information.

Another Installment of The Environmental Site Assessment Newsletter

Problems at a Site and Financing Possibilities

   NST/Engineers trusts that you will find this installment informative.

With the rapidly changing Real Estate and Federal Lending Laws, we find it helpful to frequently review those issues which effect our profession. In past issues of this newsletter we have looked at the reasons why it is prudent for the buyer and seller to request an ESA of a property. We have also examined the options for the buyer and seller if the property is found to be environmentally impacted. Now we will be examining options in financing the remediation of a site.

   For instance, you have a property for sale or there is a property you are interested in buying. You have discovered that it has some environmental problems. What are your options? The answers will depend on the type and degree of the environmental impact on the property, the value and amount of equity you have in it, and the intended use for the property by the targeted buyer. In our state of Delaware, for example, the buyer and seller can come to an agreement and the buyer can purchase an impacted property. In some other states that transfer is "locked" until the cleanup is complete. The Delaware laws give both parties more freedom to "deal" and, hopefully, result in less unusable or under-utilized real estate.

   Consider these cases. The first property is a 19th Century farm house with several acres of land. The house is in a highly desirable location, and the owner has 100 percent equity. The environmental problems discovered in the ESA Phases I & II are common ones with properties of this age: asbestos insulation on the old converted furnace and flue; some old vinyl asbestos floor tiles in the kitchen and laundry; lead paint on the exterior woodwork, the interior windows and some floors; and an old fuel oil tank buried in the back yard. The asbestos and lead paint are usually dealt with depending on the buyer’s needs.

   If, for instance, the buyer has infant children, the lead paint should be removed as lead has its most serious effects on children in the developmental stages, age 0-6 years.

   If the asbestos insulation is in bad repair, it should be removed. However, if it is in good repair and is fully and correctly encapsulated, it does not pose the same level of threat.

   The underground fuel oil tank really should be removed or properly abandoned, especially if the property is served by a well.

   In this property transfer case the seller must do a cost-benefit analysis to determine how much remediation needs to be done. If the buyer is willing to pay the asking price, with full knowledge of the extent of impact, that’s one solution. If the buyer will pay the asking price if the problems are fixed, and the remediation cost is the same amount or less than the amount the seller would be willing to negotiate, the seller could take that approach. If the remediation is projected to cost more than the seller is willing to negotiate, the seller should look to alternative financing for the remediation.

   Of these three environmental problems, the potential financial impact to the owner is the greatest from the fuel oil tank. The primary reason is that the other problems, although potentially serious, are contained in the house. The tank, especially if it is an older installation, was almost never equipped with a containment or leak detection system. Unnoticed leakage can have disastrous results.

   The second case is a vacant lot that you want to develop into a retail rental property. It is for sale at a good price, maybe too good, but the ESA uncovered the fact that it was the site of a gas station some years ago and the tanks were never removed. The combined cost of the property, and having a contractor properly remediate the site, is greater than you feel the unimproved property is worth.  
   Here is an option that can make both cases lucrative, environmentally responsible investments:  
   States have their own regulations. Delaware, for example, has funds available for the remediation of Underground Storage Tanks (UST’s) for instance. Low interest loans are available for this process because UST’s, even those installed to the letter of the law at the time will eventually deteriorate. That result in either the tank, or the piping system that attaches it to the house, failing. Eventually the tank’s contents will leak into the surrounding ground and make their way into the water supply; thereby impacting the water quality of the neighborhood.  
   In Delaware, UST’s can either be properly abandoned in place or removed. Abandonment is the process of pumping the tank as clean as possible and then filling it with an inert material such as sand or concrete. This assures that there is no future release, but it makes removal in the future more difficult and therefore more costly.  
   Delaware offers financing from as low as 3 percent, loan amounts of up to $250,000, to a maximum of 90 percent financing. Closing costs are only 0.5 percent of the loan amount. The repayment period cannot exceed 10 years. There are no restrictions on who may apply. The only condition is sufficient collateral and the ability to repay the loan.

   Here is another installment of NST/Engineers' newsletter...

Esa Does It! "Innocent Landowner Defense"

    In past installments we have looked at the reasons why it is prudent for the buyer and seller to request an ESA of a property. Now we will continue our discussion of the Environmental Site Assessment as a defense against liability actions, in particular , the "innocent landowner defense." 
   We have discussed joint and several liability and what it means to a Potentially Responsible Party (PRP) in a Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) case. We know that PRPs can include the generators of the waste, past and present owners, operators, managers of the site and waste haulers and those who contract with them.

What is the "innocent landowner defense" and how do I qualify?

    A CERCLA case is based on several facts about the site in question, among these are:
1. Contamination exists at the site. 
2. The degree of contamination:  
· the type of contamination; 
· the amount of the property that is affected; and
· the projected cost to restore the property.
3. Who is responsible and who will pay.
   This is often different entities. Remember that CERCLA is retroactive and includes contamination that occurred years before CERCLA was enacted. The actual responsible parties are often deceased, "broke", or untraceable. Therefore, the current owner is liable and "foots the bill", regardless of whether or not that owner played any role in the contamination. That is unless the owner can succeed with an "innocent landowner defense." 

   To succeed, the owners must prove that they "…did not know, and had no reason to know, that any hazardous substance…was disposed of on, in, or at the facility." (The facility being simply the site where the material is located.) To prove that they "had no reason to know", CERCLA requires that, at the time of acquisition of the site, the purchaser exercised "…all appropriate inquiry into the previous ownership and uses of the property consistent with good commercial or customary practice…" The only way to prove this is through properly and professionally executed Phase I, and possibly Phase II, ESAs.  
   Is this something I can do myself, to save money? There are no legal requirements for credentials of persons conducting Phase I ESAs. However, just as we would not recommend that you try to buy or sell real property without the help of a Realtor and a Real Estate Attorney, we would not recommend attempting an ESA without an Environmental Professional. Would you feel comfortable stating that you had reviewed all "practically reviewable data" from all the necessary Federal, State and Local records? Would you know where to go to find the records of the first developed use of the property, (including agricultural use), or a fifty year history, whichever is earlier? Would you feel confident that you know how to locate, examine, and interpret lists of NPL, CERCLIS, RCRA-TSDF, RCRA Generators, ERNS, UST, LUST, etc. sites? Would you be able to conduct the site inspection and know what signs of contamination to look for? Would you know how to conduct the mandatory interview with the site owner? Would you feel capable of conducting inspections of all the adjoining property? And last of all, would you feel qualified to interpret all the data collected, and write a comprehensive report on the site, outlining all your findings? 
   We are not being facetious, but would you go to a heart surgeon to repair your transmission, or would you go to your mechanic if you had chest pains? The point is that standard practice requires that the inspector exercise "due diligence". This is the only way to succeed with an "innocent landowner defense."  
For example, let us say 100 years ago, someone buried mercury (now a RCRA hazardous waste) in the middle of a farm field. The person died without revealing the mercury disposal. The farm was subsequently subdivided and is now a housing development of one-half acre lots. A development homeowner, who had had a properly executed Phase 1 performed before buying the home, uncovers the waste while excavating for a swimming pool. Is the homeowner liable for the cleanup costs when faced with a CERCLA case? Only the courts can ultimately decide. However, the homeowner has built an excellent "innocent landowner defense".

       NST/Engineers, Inc. has a proven track record, providing environmental services nationwide, including Environmental Site Assessments. Clients of Site Assessment services find them to be an indispensable tool for evaluation of possible transactions. Some investors have developed a business of purchasing contaminated properties, and using the Phase I and II reports as the basis for their negotiations. Whether for immediate use as a bargaining chip or just for the peace of mind, the Environmental Site Assessment is rapidly becoming as much a part of property transfer as the termite inspection. 

For a fee-based consultation call with a Licensed Professional Engineer between 3:00pm and 5:00pm Eastern Daylight Time, call (302) 239-2700.

First time home buyers will find specific help at this link First Time Home Buyer

For information at any time on our Hazardous Waste Operations and Emergency Response (HAZWOPER) and other safety training, click here.

We are proud members of the Environmental Assessment Association

to the
Environmental Assessment Association

The Environmental Assessment Association is a professional organization dedicated to providing its members with information, education and a professional designation in the field of Environmental Inspection. EAA awards members the "CEM - Certified Environmental Manager", "CRS - Certified Remediation Specialist", "CEI - Certified Environmental Inspector", "CES - Certified Environmental Specialist", and "CTS - Certified Testing Specialist" professional designations.

EAA is the largest organization of professionals who provide Environmental Services. EAA works closely with many Federal and State agencies, including a current cooperative effort with the EPA for public education on Radon.

Members of EAA range widely from appraisers and home inspectors to environmental engineers, attorneys, and lenders. The material provided by EAA to members is designed to educate our members on how to perform a basic Environmental Inspection based on historical research and a visual examination of the property.

EAA continues to provide information to members throughout the membership year via publications such as the EAA newsletter, the Environmental Times, special reports on specific environmental topics, updates and more. Seminars conducted by experienced professionals are presented in the United States and other countries in order to provide members the opportunity for one-on-one education.

EAA now offers its members access to the "Information Super Highway". Internet listings are available for members who want to make their name, designation(s), company and address available to the more than 35 million professionals who already access the Internet for information. This is the largest exposure ever available for environmental professionals.

For more information on joining EAA, write to:

1224 North Nokomis NE,
Alexandria, Minnesota, USA.

Phone (320)763-4320,

Facsimile (320)763-9290,

Internet: www.iami.org/eaa,

email: eaa@iami.org